Mitigating Economic Impact of Global Oil Supply Disruptions: A Rapid Response Brief

Summary

This rapid response brief synthesizes evidence on policy options for the Ugandan government to minimize economic disruption, stabilize fuel access, and protect households and businesses amid prolonged oil and gas supply disruptions caused by the ongoing conflict in Iran. It highlights immediate response actions such as price caps, subsidies, stock releases, demand-restraint measures, and targeted cash transfers to cushion oil shocks and ensure continuity of social and economic activities. For stabilization, the brief recommends automatic pricing formulas, strengthened social protection, increased competition, and improved transparency to depoliticize prices and limit subsidies. Long-term resilience depends on structural reforms, energy efficiency, fuel diversification, and market-based pricing. The brief cautions against overuse of tariff reductions and subsidies due to risks of medium-term instability, emphasizing careful management of shocks to sustain economic stability.

Policy message

There are multiple options the government can take to ensure the continuity of social and economic life in Uganda. When it comes to immediate response, short-term measures, such as targeted cash transfers, direct support to vulnerable households, and temporary, well communicated price interventions, have potential of being effective and equitable. For mid-term stabilisation, focus on strengthening social safety nets, transitioning from universal subsidies to targeted cash transfers, and introducing automatic pricing mechanisms that adjust to international prices. Lastly, long-term resilience requires structural investment in energy diversification, expanding renewables, electrification, and non-oil energy sources. Policies should include robust support for new technologies, infrastructure modernization, and regulatory frameworks that promote clean energy and reduce oil dependency.

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